Xu v Meng
[2022] NZHC 3496
•16 December 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-508
[2022] NZHC 3496
BETWEEN WEI XU and JUNHUI ZHANG
Plaintiffs
AND
XING MENG and HUIMIN GUAN
Defendants
Hearing: On the papers Counsel:
C L Holland for the Plaintiffs S Maloney for the Decembers
Judgment:
16 December 2022
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Friday, 16 December 2022 at 4:30 pm pursuant to r 11.5 of the High Court Rules.
Solicitors: Righteous Law (C L Holland), Auckland
Heritage Law (D Liu), Auckland
Counsel: E St John, Auckland
XU v MENG [2022] NZHC 3496 [16 December 2022]
[1] In a judgment dated 12 October 2022, I rescinded an order for joinder of parties made by Associate Judge Andrew on 12 July 2022 and made timetable directions to advance the plaintiffs’ application for joinder (the application) to a hearing.1 A hearing is now unnecessary as both the plaintiffs and defendants have explicitly consented to the application being determined on the papers.
[2] I have since received submissions on behalf of the plaintiffs seeking joinder of parties, dated 27 October 2022, and submissions on behalf of the defendants opposing joinder, dated 10 November 2022. In addition to the application itself dated 20 May 2022, I also have the benefit of earlier documentation filed prior to Associate Judge Andrew’s order of 12 July 2022. These comprise an affidavit from one of the plaintiffs, Wei Xu, dated 20 May 2022, a memorandum of counsel dated 20 May 2022, a notice of opposition dated 3 June 2022, and an affidavit from one of the defendants, Huimin Guan, dated 7 July 2022.
Background
[3] This proceeding started as a claim by the plaintiffs against the defendants for recovery of land at 105 Bayside Drive, Browns Bay, Auckland (the Bayside property). The defendants counterclaimed for recovery of a $200,000 deposit paid to the plaintiffs.
[4] The plaintiffs’ application for recovery was granted by Associate Judge Andrew on 29 July 2021.2 In granting judgment, Associate Judge Andrew accepted that the defendants had an arguable claim for return of the deposit.3
[5] The defendants subsequently vacated the property. Their counterclaim for return of the deposit remains to be determined.
[6] The plaintiffs have filed a lengthy counter-counterclaim and apply to join four new parties as part of that claim:
1 Zhang v Meng [2022] NZHC 2641.
2 Xu v Meng [2021] NZHC 1936.
3 At [46].
(a)Bangmai New Zealand Limited (Bangmai) as second plaintiff;
(b)RMPS International Limited (RMPS) as third plaintiff;
(c)Top Warehouse NZ Limited (Top Warehouse) as fourth plaintiff; and
(d)All Best Ltd (All Best) as second defendant.
Principles for joinder
[7] Once a proceeding has commenced, r 4.56 of the High Court Rules 2016 (the Rules) states that a party may be added as a plaintiff or defendant only if:
(a)the person ought to have been joined; or
(b)the person’s presence before the Court may be necessary to adjudicate on and settle all questions involved in the proceeding.
[8] Rule 4.56 must, however, be read together with rr 4.1 to 4.3, which set out the jurisdictional threshold for adding parties.4 In terms of r 4.1, the overarching principle is that the number of persons named or joined as parties to a proceeding must be limited so far as practicable to:
(a)persons whose presence before the Court is necessary to justly determine the issues arising; and
(b)persons who ought to be bound by any judgment given.
[9]Rule 4.2 states that a person may only be joined as a plaintiff:
(a)if it is alleged that they have a right to relief in respect of, or arising out of, the same transaction, matter, event, instrument, document, series of documents, enactment, or bylaw; and
4 Smith v Noble Investments Ltd [2017] NZHC 477 at [7] and [25].
(b)if that person brought a separate proceeding, a common question of law or fact would arise.
[10] Rule 4.3 states that a person may be joined as a defendant if it is alleged that there is a right to relief against that person in respect of, or arising out of, the same transaction, matter, event, instrument, document, series of documents, enactment, or bylaw.
[11] Finally, the Court has a residual discretion to refuse joinder on the grounds that it will prejudice or delay the proceeding.5 The Court must keep in mind the objective of the Rules to secure the just, speedy and inexpensive determination of proceedings.6
Plaintiffs’ new claims
Bangmai shareholding
[12] The plaintiffs say that Bangmai is one of their companies. On or about 11 December 2017, one of the named defendants, Ms Guan, paid an unspecified sum of money to invest in Bangmai. In or about October 2018, Bangmai required further cash input for its shareholders. Ms Guan advised the plaintiffs that she could not afford to inject further funds into Bangmai. One of the named plaintiffs, Mr Xu, says that he therefore agreed to increase Ms Guan’s shareholding in Bangmai “based on the defendants’ promise of an unconditional purchase of the Bayside property.” He says he and his wife paid $167,500 from their own personal funds into Bangmai on behalf of Ms Guan “in reliance on the defendants’ promise to purchase the property.” This had the effect of increasing Ms Guan’s shareholding in Bangmai from 0.83 per cent to
11.5 per cent.
Use of Mercedes-Benz vehicle
[13] The plaintiffs also say that during the time the defendants occupied the Bayside property they allowed Ms Guan to have the full unrestricted use of a Mercedes-Benz
5 High Court Rules 2016, r 4.2(2).
6 Rule 1.2.
GLE250 motor vehicle, registration KAN814, owned by Bangmai. Bangmai paid instalments towards its purchase price and insurance premiums totalling $57,286.18.
[14] On or about 30 June 2020, Ms Guan paid the balance owing on the vehicle of approximately $30,895. Mr Xu says:
I would not have given Guan the unrestricted use of Bangmai’s vehicle if I did not believe that the defendant would go through with the purchase of the Bayside property.
Takeover of two Bangmai retail branches
[15] Bangmai had a number of retail branches throughout Auckland. An agreement was reached at some stage between October 2019 and February 2020 among the plaintiffs and Ms Guan that Ms Guan would take on “full responsibility” for the Auckland City and Rosedale retail branches. Ms Guan is said to have used her company, All Best, to operate the two branches.
[16] The plaintiffs say that All Best failed to pay three months’ rent, operating expenses and property rates. All Best is also said to have removed plant and equipment without authority, and to have caused physical damage to the two retail branches requiring repair. Bangmai has suffered loss as a result.
[17] In addition, Mr Xu says that to make the arrangement work, he approved Ms Guan to order stock for the two branches from Bangmai, RMPS and Toy Warehouse on credit (that is, without payment prior to delivery). The total amount outstanding for stock delivered, but not paid for is said to be $627,070.01.
[18] Again, Mr Xu says he would not have allowed All Best to purchase stock from Bangmai, RMPS and Top Warehouse “if it were not for the defendants’ promise that they would purchase the Bayside property”. He does not, however, say that the taking over of the two retail branches was also in some way related to the purchase of the Bayside property.
[19] The total amount variously sought by the plaintiffs, Bangmai, RMPS and/or Top Warehouse against the defendants and/or All Best, is $901,032.28 made up as follows:
Description $ A Investment in Bangmai 167,500.00 B Instalment payments for KAN814 48,771.00 C Insurance payments for KAN814 8,515.18 D Repair costs of damage to the Queen Street premises 1,550.00 E Plant and equipment removed without authority 4,000.00 F Three months’ outstanding rental and Opex for Queen Street premises 30,623.07 G Three months’ outstanding rental and Opex for Rosedale Road premises 11,498.85 H Two outstanding rates payment for Rosedale Road premises 1,504.17 I Outstanding payment for stock ordered from Bangmai 28,866.54 J Outstanding payment for stock ordered from RMPS 539,322.99 K Outstanding payment for stock ordered from Top Warehouse 58,880.48
Companies
[20] Mr Xu says he was a director of Bangmai from 4 April 2013 to 12 October 2018 and a shareholder until 9 October 2018. His wife, Junhui Zhang, is a majority shareholder in Bangmai, holding 60.50 per cent of its shares. Mr Xu says his wife has the authority to bring the counterclaim in Bangmai’s name. However, the sole director is recorded as Xiaoye Wang and counsel for the defendants point out that there is no authority given by him or her to Bangmai being joined as a plaintiff.
[21] Mr Xu also says he is the sole director and shareholder of RMPS and has authority to consent to RMPS being joined as a plaintiff.
[22] He also says he is the general manager of Top Warehouse and has authority to consent to Top Warehouse being joined as a plaintiff. However, the sole director is recorded as Hung Quoc Nguyen and, again, counsel for the defendants point out that there is no authority given by him or her to Top Warehouse being joined as a plaintiff.
[23] Although there is no recorded authority in respect of Bangmai and Top Warehouse, I do not envisage any difficulty for the plaintiffs to formalise authority for the two companies to be joined as plaintiffs.
Discussion
[24] The plaintiffs have not described exactly how each of the transactions was conditional on the defendants’ purchase of the Bayside property. No documentation has been provided to substantiate their claims. As to the Bangmai shareholding, Mr Xu says:
I agreed to increase her shareholding … based on the defendants’ promise of an unconditional purchase of the Bayside property.
[25]As to the Mercedes-Benz vehicle, Mr Xu says:
Again I would not have given Guan the unrestricted use of Bangmai’s vehicle if I did not believe that the defendants would go through with the purchase of the Bayside property.
[26] No allegation is made by Mr Xu about the agreement for All Best to take over responsibility for the two retail branches being related in any way to the purchase of the Bayside property. Finally, as to the purchase of stock on credit, Mr Xu says:
I would not have allowed All Best to purchase stock … if it were not for the defendants’ promise that they would purchase the Bayside property.
Bangmai shareholding
[27] As to the shareholding in Bangmai, it is the plaintiffs who have a claim against Ms Guan if, as they say, they made a personal loan to Ms Guan to enable her to increase her shareholding from 0.83 per cent to 11.5 per cent. Bangmai has no rights to take proceedings against Ms Guan in relation to the payment for shareholding in the company.
Use of Mercedes-Benz vehicle
[28] As to the use of the Mercedes-Benz motor vehicle, proceedings can be taken by Bangmai against Ms Guan if, as the plaintiffs say, Ms Guan did not return the vehicle to Bangmai or reimburse it for payments it had made when the arrangement
for its use came to an end. Mr Xu does not allege any contractual or equitable connection with the purchase of the Bayside property. In his affidavit Mr Xu merely states that he would not have given Ms Guan the unrestricted use of the vehicle if he did not believe the defendants would go through with the purchase of the Bayside property. He does not claim any agreement or even any discussion with Ms Guan about the use of the vehicle being conditional on purchase of the Bayside property. He refers only to his own belief.
Takeover of two Bangmai retail branches
[29] Mr Xu makes no claim or indeed says anything about the takeover of the leases being connected with purchase of the Bayside property. Presumably Bangmai remained liable as lessee of the two branches and therefore has a right of action against Ms Guan as sub-lessee. Bangmai may also have a claim against All Best if, as Mr Xu claims, Ms Guan incorporated All Best to operate the two retail branches. The sublease of two retail branches, however, did not arise out of the same transaction, matter, event, instrument, document, series of documents, enactment or bylaw as the purchase of the Bayside property in terms of r 4.2.
[30] Finally, as to the purchase of stock on credit from Bangmai, RMPS and Top Warehouse, Mr Xu is again vague on any connection between the purchase of stock 18 months after an agreement to purchase the Bayside property. He says he would not have allowed All Best to purchase stock if not for the defendants’ promise that they would purchase the Bayside property. Mr Xu does not claim to have ever discussed it with Ms Guan, let alone reached any set of agreement, which connected the two distinct transactions between different parties.
Result
[31] The plaintiffs have failed to satisfy me that the jurisdictional threshold for joinder of other parties is met. Their claims can and should be brought as separate proceedings against Ms Guan. The reason why the plaintiffs may have entered these various arrangements with Ms Guan is immaterial. It does not affect the extent of Ms Guan’s liability, nor does it affect any other issue in such proceedings if they are filed. In addition, the other parties’ presence is not necessary for the Court to
determine the defendants’ counterclaim for return of the deposit in the present proceedings. Joinder will also cause further delay in determination of them.
[32] Although the defendants make a simple counterclaim for return of the deposit of $200,000 they paid on 15 October 2018, the plaintiffs are, of course, able to make a counter-counterclaim for rent or for any other loss connected with the purchase of the Bayside property.
[33] The plaintiffs claim Ms Guan occupied the Bayside property without paying rent from 7 May 2020 (about a month after Ms Guan informed the plaintiffs that she would not be purchasing the Bayside property) to 20 September 2021 (about seven weeks after the High Court ordered the return and possession of the Bayside property to the plaintiffs). The sum is said to total $162,916.19.
[34] The application for joinder of Bangmai, RMPS and Toy Warehouse as plaintiffs and All Best as a defendant is accordingly dismissed.
[35] I direct a conference to be organised by the Registry to make timetable orders to progress the matter to a hearing as soon as possible.
Woolford J
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